Nokia’s Twin Pivot: Shedding Legacy Hardware While Betting Big on AI and 5G

Nokia’s share price doubles as AI infrastructure and optical networks drive 49% revenue growth, while a strategic FWA swap and Virgin Media O2 deal boost outlook.

The Finnish network equipment maker has undergone a remarkable transformation in recent months, with its share price more than doubling since the start of the year to trade at around €11.13. That rally — which has seen the stock hit a fresh 52-week high — reflects a strategic overhaul that is as much about what Nokia is selling as what it is buying.

A New Stake in Inseego Marks a Clean Break from FWA

In a move that underscores its determination to exit low-margin hardware, Nokia has agreed to transfer its fixed wireless access (FWA) customer premises equipment business to California-based Inseego. Rather than a straightforward cash sale, the transaction is structured as a share swap. Nokia will receive Inseego stock worth approximately $20 million, with plans for additional investment, leaving it with an 11% stake in the US broadband specialist once the deal closes — targeted by the end of 2026.

The arrangement is cleverly designed to keep a foothold in the FWA space without the margin drag. The two companies have also signed a development partnership focused on 6G technologies. For Inseego, the acquisition is transformative: it is expected to roughly double its revenue and bring in major customers such as Orange and Telia.

The Real Growth Engine: AI Infrastructure and Optical Networks

While the FWA divestment clears away legacy baggage, Nokia’s core business is firing on all cylinders. Group revenue rose 4% to €4.5 billion in the latest quarter, but the real story lies within the segments that management has designated as its future. Revenue from the AI and cloud division surged 49%, while optical networks — the high-speed transport systems that form the backbone of modern data centres — climbed 20%.

This is no accident. Hyperscalers and large enterprises are pouring capital into AI workloads that demand enormous bandwidth, and Nokia’s optical transport gear has become a critical component of that infrastructure buildout. The company has already lifted its full-year 2026 growth forecast for the network infrastructure business to between 12% and 14%.

Virgin Media O2 Deal Strengthens the 5G Hand

Alongside the AI-driven momentum, Nokia’s traditional mobile networks business is also showing signs of life. The company has secured a multi-year contract with Virgin Media O2 to upgrade and expand the UK operator’s 5G radio network using Nokia’s AirScale RAN portfolio. The deal reinforces Nokia’s position in the European telecom market, where operators are racing to modernise their networks for the next generation of services.

Analyst Optimism Meets Near-Term Margin Caution

The market has taken notice. JPMorgan has lifted its price target sharply to €12 with an overweight rating, while Morgan Stanley sees fair value at €11. Trading volumes over recent sessions have been about 48% above the daily average, reflecting heightened investor interest. The valuation is punchy — the price-to-earnings ratio stands at roughly 84 — but that multiple assumes continued growth, not a plateau.

Yet the path is not entirely smooth. Nokia’s management has warned that the second and third quarters will see weaker gross margins in the mobile networks business due to shifts in product mix. The expectation is for profitability to recover meaningfully only in the final quarter of the year. For now, the market appears willing to look through that near-term noise, betting instead on a story of portfolio transformation and exposure to the most powerful secular trends in technology.